One might expect significant variations in price movements in an electricity market that spans half the continental United States, from Chicago to New Jersey. However, there is a remarkable degree of consistency in spot (index) prices and in the forward electricity curves across the PJM Interconnection (PJM). 

NYISO:

Temperatures in New York City are expected to remain in the mid-90s throughout Monday. Even though precipitation is likely in the 7-10 day range, it is expected that Monday (7/27) will approach the year-to-date system peak of 29,979 MW which was set last Monday (7/20).

A high-pressure system has settled over the Midwest and Mid-Atlantic which will keep temperatures elevated today and tomorrow. These high temperatures will result in PJM and NYISO electric grids being pushed to the max. In NYISO, peak load of more than 29,933 MW is expected beginning at 4:00 PM today. Between 3:00 -5:00 PM, load is forecast at or above 29,700 MW, vs the current 2020 peak of 28,867 MW.

It is important to note that load this morning is coming in ~600 MW higher than yesterday’s projections, which reflects how warm it is in the New York region today. Temperatures in New York City are expected to exceed 95 degrees. 

It appears the fireworks have come early this year as several markets are facing medium to high threats for Coincident Peaks (“CPs”) today and into the early part of next week.

With temperatures climbing nationwide, we are predicting some Coincident Peak (“CP”) alert activity this week. For clients looking to save on next year’s Transmission costs and Capacity costs (PJM market only), it will be important to monitor the situation (especially real-time weather conditions) and reduce energy consumption in the late afternoon hours, to the extent possible.

PJM released its initial report on electric load reduction as a result of COVID-19. Figure 1 shows the decrease in peak demand (blue bar) and overall electricity usage (green bar) through the middle of May, with weekends shaded in gray. On average, the weekday peak demand (in kW or MW) fell between 6.5% to 15.2%. Overall energy usage (in kWh or MWh) was not as significantly affected and was down by approximately 8% since March 24th. Not surprisingly, the weekends experienced the smallest reduction to demand and consumption.

In 2018, the State of New Jersey passed The Clean Energy Act which requires that 100% of the electricity in the state come from renewable power sources by 2050. For over 15 years, New Jersey has had a vibrant solar power market with structures and incentives that expanded the amount of solar output from 4.3 MWs in 2004 to 2,908 MWs in 2019. 

The State of New Jersey has been at the forefront of an ongoing conflict between a state’s right to establish its own clean energy goals and its participation in a regional competitive electricity marketplace. New Jersey belongs to the PJM Interconnection (PJM), which spans all, or parts of 13 states and the District of Columbia as shown below in Figure 1. New Jersey and many other states want to adopt their own clean energy standards. However, grid operators, such as PJM, are finding it nearly impossible to create a competitive marketplace with consistent rules among states that have very different renewable power goals and carbon emission standards.

Unlike ERCOT, which relies solely on the price of energy to ensure sufficient supply, the PJM market, ISO-NE, and the NYISO all rely on capacity payments to ensure that there is enough electricity generation available to meet demand. Like wholesale energy prices, capacity prices in PJM are set through an annual auction. Generating units that clear this annual capacity auction are guaranteed a fixed revenue stream in exchange for the guarantee of their availability to run if called upon. This revenue is designed to ensure that an appropriate amount of generation is available at times of peak energy demand.

In light of the impact of the Coronavirus on business operations, we are sharing information about Coronavirus and Contract Disputes circulated by the law firm Sidley & Austin.  It provides a high-level summary of the force majeure issues raised by the spread of this illness.  If your electricity and/or natural gas usage has or will be significantly affected by the spread of the Coronavirus, you should seek legal advice to determine if it is appropriate to provide a force majeure notice to your energy supplier.  As discussed in the document, the relevant electricity or natural gas contract provision may require “prompt” notice of the force majeure event.